credit and the interest insomniac

© Apr 8, 2023 National Financial Education Centerat Debt Reduction Services

www.NationalFinancialEducationCenter.org

Credit and the Interest Insomniac

Using Credit Wisely



Housekeeping

• Silence Cell Phones

• Water

• Restrooms



Nationwide, non-profitNationwide, non-profit

Established in 1996Established in 1996

Financial educatorsFinancial educators

Why We’re the Experts



What Is Credit?What Is Credit?

Credit Reports & ScoresCredit Reports & Scores

Power of InterestPower of Interest

Overview

Using Credit WiselyUsing Credit Wisely



What is Credit?



What is Credit?

Free Money!

Status Symbol!

Helps Me Buy What I Can’t Afford

Free Loan!

EVIL!



Money!

What is Credit?

NOT



a Loan!

What is Credit?

NOT



• A Privilege, Not A Right.

What is Credit?



• A Privilege, Not A Right.• Recognition

Capability & Responsibility

What is Credit?





• Binding AgreementYour Promise (“Character”)

What is Credit?





• Binding AgreementYour Promise (“Character”)

• A Financial Tool

What is Credit?



Credit Reports and Scores

Credit Report:• History record• Credit Bureaus (“for profit”

companies)

= Credit History = Credit Record = Credit File = “Credit”



Genuinely Free

No Strings Attached

No Credit Card Required

www.AnnualCreditReport.com





Report includes:IDENTIFYING INFORMATION

EMPLOYER INFORMATION (NOT INCOME)

DETAILS OF ALL CREDIT LINES AND LOANS

PUBLIC RECORD

INQUIRIES

PERSONAL STATEMENT




Credit Score:300 - 850Based on reportIndicates risk




Credit Score:300 - 850Based on reportIndicates riskHigher is better



National Distribution of FICO Scores

13%

27%

18%

15%

12%

8%

5%2%

0%

5%

10%

15%

20%

25%

30%

300-4

99

500-5

49

550-5

99

600-6

49

650-6

99

700-7

49

750-7

99

800+

National Distribution of FICO Scores

Source: My FICO (a division of Fair Isaac): www.MyFICO.com

Excellent Credit generally from 750-

775 on up



• At Credit Bureau Websites–TransUnion, Experian, Equifax

• Credit Repair Companies?

Disputing Errors



• Dispute Errors• Cannot Remove Accurate

Negative Information

Disputing Errors



The 5 Areas a FICO Score Considers

FICO = “Fair Isaac Company”(pioneer in the scoring

formula) 75

8



What is Interest?

•%-based fee of balance owed

• “Rent” on money•Related to RISK•Fixed or Variable



The Power of Interest

Purchase Furniture: $2,0003 years at 25% APR




No Interest:$55.56/Month




$880 in Interest!!!44% More!!!



With Interest:$79.52/MonthTotal = $2,880

No Interest:$55.56/Month




Purchase Furniture: $2,000No Interest/No Payments

For 3 Years



$2,233 in Interest!!!112% More!!!


Purchase Furniture: $2,000No Interest/No Payments

For 3 Years

Balance @ 3 Years$4,233!!!



The Main Thing to

Remember About

Interest…

What is Interest?



InterestNeverSleeps



InterestNeverSleepsEVER



• Is that Good?

Interest Never Sleeps!



• Is that Good?•Savings

Plans &

Investments




The Second Thing

to Remember

About Interest!




Make Interest Work FOR You…Not AGAINST

You!



Basics of Credit Cards

•Drive at speedometer’s top speed?




•Drive at speedometer’s top speed?

•Max credit card’s limit?



•Minimum payments2-5%.


• Watch for FeesAnnual Program, Late, Balance Transfer, Over-Limit, Bounced Check, Card Replacement, Additional Card, Cash Advance, Pay by Phone, Activation, Account Maintenance, Foreign Exchange, Account Set Up, Membership, Insurance, Statement Copy, Expedited Card …

•Lower minimum = longer pay off(20+ years)



• Grace periods =No Interest

• Balance Carry-Overs, Cash Advances & Convenience Checks

-CANCEL GRACE PERIOD





•Universal Default




•Payment HolidayInterestNEVERSleeps



• 60% of collegefreshmen MAX OUTcredit cards

• US households pay $1,100 in credit card interest annually

• Prepaid cards = Lots of Fees

Dangers of Credit Cards



Who Cares About Your Credit?

Home & Auto Lenders




Landlords




More Employers




Car, Home &Life Insurance




Utilities &Cell Phone Providers



Living without a Major Credit Card

• Checking and savings accounts• Have phone and utility report

your payment history• Retail and gas cards• Secured Card• Cosigner



Tips for Strengthening SCORE

• Dispute errors• Budget• Stay under 33% of credit limit!• Contact creditors• Avoid applying for a lot of new credit

within a short period



• Shop for best rates• Don’t close old accounts• Pay down balances• Get accounts “current”• Pay bills on time

and in full.

Tips for Strengthening SCORE



Thank You for Attending!

We are ALWAYS open to your Questions

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